Page 3


LOAN SHARKS, THE LEGISLATURE’S ‘PETS Legislators Legalized Credit Insurance Dodge in ’49 And the Sharks, Not Content, Grew More Ravenous AUSTIN The laws of this state, for which the legislators now in session are responsible, legalize usury. A year ago this newspaper reported though the Texas Constitution limits interest on loans to ten percent, the legislature has legalized and the Board of Insurance Commissioners has promulgated total annual charges of 140 percent on small loans. In 1949, under pressure from “credit insurance” officials and Rep. Doug Bergman, who was also a law partner of one of those officials, the legislature approved “credit insurance,” which lets lenders require borrowers to buy “insurance” policies on loans. Former Secretary of State Tom, Reavley told the Observer bluntly: “The Texas Legislature. has enacted a usurious subterfuge on the statute books. In my opinion there’s no excuse for a statute of the language of AUSTIN Though two weeks have elapsed, we are still rummaging around in search of some civilized explanation of the regal state Democratic executive committee’s decision to try to legally contest the use of the word “Democrat” by other groups. The Democratic Party, said Adlai Stevenson, “is the party of no one., because it is the party of everyone.” The word “Democrat” no ritore belongs to anyone officially or unofficially than the word “people.” Senator Johnson and Speaker Rayburn made much of never barring anyone from membership in the party, in spite of “past errors” in supporting Eisenhower. Yet here comes Daniel’s committee saying : “We’re Democrats ; you’re not.” Of all the people to say this the Daniel committee should be the last. For, everyone will remember, it was Price Daniel who joined Allan Shivers in the “Democrats for Eisenhower” movement. How, in the name of party decency, can that executive …. The El Paso Herald-Post excoriates the Pool bill as “the most outrageous piece of legislative hypocrisy we can remember” and “a conspiracy to defeat. Ralph Yarborough and elect Martin Dies.” It would cost $1 million and “Martin \(Dies isn’t worth $1 million,” said the paper. “Judging by his congressional record, he is worth $0.00.” “The Kingmakers are for the bill,” said the Herald-Post. Rep. Malcolm MacGregor of El Paso switched to vote for it “as a favor to Speaker Waggoner Carr,” said the HeraldPost ; “You should do favors at your own expense.” :. The Brotherhood of Locomotive Firemen and Enginemen opposes increasing college tuitions in its newsletter. “It will, if passed, create -a hardship on many of our members who desire the advantagesof higher education for their children,’,.’ said the brotherhood. The brotherhood is anxious to have passed S. B. 100 to authorize the Railroad Commission to give paramount consideration to public convenience and adequacy of service when considering discontinuing passenger train service. About 125 passenger runs have been cut off in Texas in the last five years. …. Dudley Dougherty of Beeville is mailing out a painphlet he’s written on the water problem. The millionaire who opposed Lyndon Johnson for the Senate in 1954 proposes diverting some of the 1,200,000 acre-feet of water that flow into the Gulf from the Mississippi every day; “canalling” section six.” Section six of the law says credit insurance charges that are in accordance with the. commission’s maximums cannot be held to be usurious. The largest Texas credit insurance companies turn back to the moneylenders 85 to 90 percent of all “premium” income they collect. With the remaining 10 or 15 percent of the premiums, they meet all claims under the insurance and their own overhead and profit. Bankers Health and Accident Insurance Co. of Dallas ,between 19511954 took in $10.3 million in premiums, paid $0.8 million in claims \(7.4 $9.1 million back to the moneylenders .-man was interested in, Home Life and Accident, took in $10.9 million in pre-, miums, giving $9.7 million back to the committee explain or justify its vote to prevent “Democrats of Texas,” an Organization of life-long working Democrats from the farms, the city political clubs, and the unions, from using the word “Democrat,” after which they refused to include “Democrats for Eisenhower” in their prohibition ? Apparently Daniel Democrats want to keep the party safe for the country club. It is all right for, a Democrat to baCk the Republicans in the name of the Democratic Party, as long as he doesn’t back the Democrats in the name of the Democratic Party, when Shivers, Daniel, et al. -, want to vote Republican. The whole affair is so ghastly, we will say nothing more about. it, hoping that the flush of embarassment on the cheeks of the conservative committee members means they will pack up their tents and silently steal away from the jungle they wandered into so blithely. BUT WE WILL SAY some more about the “Democrats of Texas.” surplus water from East Texas to the various cities along the Gulf.; expanding the Wichita Falls project for changing brackish water to fresh ; and a large federal expenditure on converting sea water to fresh water. He’ll have a book out soon, . Rep. Wright Patman, in his newsletter, said “the big New York banks have unleashed an attack on the credit unions, savings associations, and savings banks” because, says Patman, “these thrift institutions stand in the way of a few big banks trying to take over complete control of savings and credit in the nation.” Listening Post …. “Labor Economic Review” of the states in which rural domination of the legislature causes a “substantial distortion from democracy.” It points out that no county can have more than one state senator, and that for the House of Representatives, no county may have more than seven representatives unless its .population is greater than 700,000, after which it may have only one additional representative ‘for each 100,000. …. Speculation on the Pool bill’s effect takes many turns. A Yarborough-Dies runoff would likely help Dies ; Yarborough would be very strong in a race against Hutcheson. If it were Dies vs. Hutcheson, might not the liberals support Hutcheson, as some did Bruce Alger against rightwing Democrat Henry Wade.? ing all claims with $0.6 million. Another legal dodge on the statute books is “investment certificates,” legalized by the legislature, too. Here the lender can require . the borrower to buy an “investment certificate” as a condition to a loan. Harry Bengston, Deputy Banking Commissioner of the state, told the Observer : “I say it’s subterfuge all the way around to evade . the usury statute … wholly unconstitutional.” Substantial to these stories, the InSurance Commission set a hearing on the problem. Air Force Maj. Milton Swett of San Antonio called credit insurance “a license to steal.” He pointed out the regulation permitting “credit insurance” of an amount equal to 175 percent of the actual amount is “jus t way the public can be, gouged.” Reputable insurance men If Texas political history of the. last four years teaches anything, it ought to teach such specimens as Lyndon Johnson and Price Daniel that liberal Democrats don’t quit. After the crushing national defeat of 1952, Democrats rallied around their ideals again in 1953, first as the Democratic Organizing Committee, then in the Rayburn-Johnson controlled Democratic Advisory Council. Yarborough lost in .1954, but organization work went on. Permanent offices in the big cities operate yearround for the social and political ideals of liberalism. In May, 1956, state convention, rousing from a prolonged coma of intimidation by the status of Johnson and Rayburn in Washington, liberal Democrats insisted on electing one of their kind the national committeewoman. Johnson’s silence and Rayburn’s one-day-too-late endorsement helped Daniel skin past Yarborough for governor by 3,500 votes out of 1,400,000 cast. The loss was bitter gall. In September, at the Fort Worth convention, the very working Democrats now maligned by the executive committee were denied their legal majorities by theft. Even the top aides to Johnson and Daniel admit that. Deprived, by 4ie various methods available to political bosses, of their rightful victories, the liberal Democrats of the state have neither wilted nor retired from politics. Whenever there’s a battle to be fought for the things they believe in, they’re out in the rain fighting. If they lose there will be another battle in another rain. Lyndon Johnson severed himself from the future when, deafened by the floods of spite that flow in his mind, he decided to gut Texas liberals rather than capitulate to it. Sam Rayburn is aging, and perhaps he leans too heavily these days, in his Texas affairs, on the senior senator. Price Daniel seeks to run with the country club set in politics and then double back through the east side to distribute among the rabble a few crumbs from the tables of the patricians. None of them takes the measure of the new Texas. They will not’ exterminate its swarming Democrats by erecting their voices against their existence ; they will not perpetuate their bossism by trying to lock tlge doors to their hand-picked soirees. This they will learn painfully on May 18th of this year when the political idealists they seek to divide and destroy meet in state convention to form a grass roots party with meanings and purposes in the traditions of the Democratic Party of the United States, not the Dixiecrat party of the South. R.D. from as far away as Chicago asked for reforms: .. . But the ‘ commission piously announced a mere ten percent rate reductionstch . an inadequate reform that Commissioner. Morris Brownleo, himself a ; former credit insurance company official; voted “do” on grotinds it was not enough. So encouraged, the credit insurance business zoomed to $30 million in 1956 $30 million out of the pockets of the poor. , ‘ NOW COMES an eloquent series in the T-TotiSton Post on the continuation of this “legal swindle.” Right in the middle of the 1956 Christmas season, when people of good and genffous heart were trying to give as much as they could to their loved ones and were borrowing to do it, C. E. Buchner, \\manager of the Houston BeOr Business Bureau, de. dared, Emmet Collins reports, that “there are 250 loan sharks in Houston grossing $1 million a month on loans of $5 to $50.”, A Harris County grand jury said “hundreds ‘of our citizens are being swi:iidled out of their earnings” by combines that appear to be “operating wi?hin the confines of the laza” Where theUstate’s credit insurance rates before let a lender charge $15 credit insurance premiums on a $50 loan for only three months, they can now charge about $11.50 for the same loan. To make tip for this inconvenient cut in their fat profits, the loan sharks have now –Aded a “guaranty fee agreement” whereby the borrower appoints the lender “as my agent and attorney-in4act, to, obtain said loan for me.” Cut do*n one dodge, they find another. They liai -asp *biT telephone and mail. They call on people at home ; they telephone neighbors and call delini quent borrowers “dead-beats.” An empliV0e .,0,f a retail store in San Antonio ;tOld ‘us .of a co-worker who was driven ‘fi4anfac by calls and visits from a ,Collectf4 who once tried to pull her out bf -the front door of the store. The Dallas Junior Bar said 70 percent of 180 major Dallas businessmen queried.:t!aid their employees are “hounded” by small loan. companies; Houston’s 1311B said 52 percent of ern, ployers surveyed reported “hounding:” Maj. Swett :was the object of threatening phone `calls in San Antonio; death was threatened to his family. In February, 1955, a sidewalk argument in dow s ntown Dallas over collection of a, $3.80 payment on a Christmas loan led to the knife-murder of a loan; company collector. Collins quakes an employee and an officer of the Lone Star Bag and Bag-, ging Company in Houston that “we get between 250 and 300 calls a day from loan companies.” The firm employs 800 pe6ple. . We checked up and down “Little Wall Street” in San Antonio the 300 blocks of Navarro and Presa. Mexican wo’nen with their children enter and leaVe the offices all day. One loan office `worker told us : “Three nights a week I go into their \(Mexihow they live,, it’s awful,” . . , LENDERS of small loans need 3Q or 36 percent return on their loansno ‘nom: There is no way to stop their rakis :on the poor except by putting ahem, tinder the Bvking De,